Cal Am's cost estimates for desal project too high, group says

California American Water has vastly over-estimated the cost of the Monterey Peninsula Water Supply Project and should be required to cut spending on the desalination-based proposal by tens of millions of dollars, say ratepayer advocates with the California Public Utilities Commission.

In Feb. 22 testimony filed with the PUC, the Division of Ratepayer Advocates suggested Cal Am's estimated costs are too high for everything from the proposed desal plant to pipelines to operations and maintenance, and much lower project cost caps should be implemented. The lower costs could save Peninsula ratepayers as much as $24.6 million per year, according to the testimony.

The ratepayer advocates say the Cal Am-owned desal plant north of Marina should cost at most between $182.7million and $216.6 million, depending on the size of the plant. Cal Am estimates the cost at $223.5 million to $277.8 million.

The company is proposing to build a plant capable of producing 6.4 million gallons per day or 9.6 million gallons per day, depending on whether a supplemental groundwater replenishment project backed by the Monterey Regional Water Pollution Control Agency is deemed feasible and ready to go.

The advocates argue Cal Am should be required to focus on construction of the smaller desal plant, along with groundwater replenishment, as its primary option, but the larger plant should be approved if the groundwater replenishment proposal falls through.

The pipelines and terminal reservoir, known as Cal Am-only facilities in the company's proposal, should cost a maximum of $66.1 million, said the ratepayer advocates, and not $107 million as called for by Cal Am.

Finally, advocates argue Cal Am's annual desal plant operations and maintenance costs should be lowered from Cal Am's estimated $9 million to $11 million, depending on plant size, to between $7.2 million and $8.8 million.

In the testimony, the advocates suggest Cal Am's proposed costs were "inconsistent with the (desal) project description update, not fully justified or calculated incorrectly."

The advocates' responsibility is to attempt to protect utility customers in California. The division regularly argues in favor of lower project cost estimates than those floated by proponents.

Cal Am officials declined to comment on the assertions and said all arguments would be addressed in its rebuttal testimony due Friday.

The company is seeking a replacement source of water because of a state-ordered cutback in pumping from the Carmel River that is to take full effect in 2016.

The advocates' Feb. 22 testimony was joined by filings from nearly a dozen agencies and organizations participating in the PUC's review of Cal Am's project application.

Among highlights of the testimony:

· The Peninsula mayors' water authority formally outlined its conditions of support for the project, including detailed back-up plans and public governance, that are supported by the Monterey Peninsula Water Management District and the county Board of Supervisors.

· The Coalition of Peninsula Businesses called for a larger desal plant capable of producing 16,000 acre-feet of potable water per year to address what it called the real demand.

· The water management district outlined the rationale for its pursuit of alternative desal proposals, including the specter of lengthy litigation over Cal Am's plans to draw water from the overdrafted Salinas Valley groundwater basin and the possibility that delays in proposed test wells could push the availability of crucial results into early 2016. The district also suggested aquifer storage and recovery, groundwater replenishment and Pacific Grove's smaller water projects should all be judged on equal footing with Cal Am's desal plant project.

· The Salinas Valley Water Coalition submitted testimony from a water expert who argued tapping the groundwater basin would be fraught with challenges.

· The Surfrider Foundation argued that shoreline wells, as proposed by Cal Am, are the preferred method because they avoid ocean impacts. The foundation sought assurances that brine disposal from the desal plant would be properly handled and its impacts on the ocean fully addressed.

The testimony featured expressions of support from notables including Rep. Sam Farr, Monterey Bay Aquarium executive Julie Packard and former legislator Fred Keeley.

Next up: The PUC is scheduled to host evidentiary hearings at its San Francisco headquarters, set for April 2-5 and 8-11.